Spain has exceeded the EU budget deficit limit of 3.0 percent of gross domestic product since the 2008 financial crash and ensuing eurozone debt crisis brought the over-extended economy to its knees.
Since then, successive governments have had to introduce draconian austerity policies to try to stablise the public finances which continue to be under pressure, although the economy has recovered and is currently among the best performing in the European Union.
"Overall, the Commission considers Spain's draft budgetary plan to be broadly compliant with the provisions of the Stability and Growth Pact," a statement said.
"It invites the authorities to stand ready to take further measures should fiscal developments indicate a heightened risk of not fulfilling the ... requirements."
For this year, the Commission initially set the deficit-- the shortfall between government income and spending - at 3.1 percent of GDP but it said Spain would now miss this target, coming in instead at 3.3 percent.
Similarly for 2018, the deficit would be 2.8 percent of GDP, not 2.2 percent.
The 2016 deficit is expected at 4.6 percent.
The Commission, the EU's executive arm, said it still expected Spain to make the savings sought both this year and in cumulative terms, for 2016 and 2017.
The Commission said it also believed that Spain had made only "limited progress" on strengthening its fiscal and public procurement policy framework and it should do better.
EU Euro Commissioner Valdis Dombrovskis said Spain "has recorded good economic performance and we invite the Spanish authorities to continue to correct their excessive budget deficit and implement key structural reforms."
After two indecisive elections, centre-right Premier Mariano Rajoy returned to power late last year and in December presented a budget based on the Commission's 3.1 and 2.2 percent targets, aiming to bring Spain back into line with EU rules.
The Commission did not explain why Spain would now not be able to meet those targets.